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Gordon K. Dahl, Executive Director of the South Jersey Economic Development District, stands along Delilah Road, near the entrance to the Next Generation Aviation Research and Technology Park in Egg Harbor Township. A Press investigation reveals that the SJEDD owes money to contractors connected to the NextGen project.

Michael Ein

Signage is pictured at the Delilah Road entrance to the Next Generation Aviation Research and Technology Park in Egg Harbor Township. File photo Jan. 25, 2012.

Gordon K. Dahl, Executive Director of the South Jersey Economic Development District, stands along Delilah Road, near the entrance to the Next Generation Aviation Research and Technology Park in Egg Harbor Township. A Press investigation reveals that the SJEDD owes money to contractors connected to the NextGen project.

Michael Ein

Signage is pictured at the Delilah Road entrance to the Next Generation Aviation Research and Technology Park in Egg Harbor Township. File photo Jan. 25, 2012.

Findings

The South Jersey Economic Development District owes about
$495,000 to contractors that completed the infrastructure work at
the site of the NextGen Aviation Research and Technology Park. The
money is reimbursable to the district under a $2.5 million U.S.
Economic Development Agency grant, but the district must first come
up with the $495,000.

The district has exhausted a $350,000 bank loan it originally
used to help pay the contractors.

Audits of the district's finances are nearly two years behind; a
2009-10 audit was not completed until last week. In the 2008-09
audit, completed in 2009, auditors found "significant deficiencies"
and questioned Executive Director Gordon Dahl's use of a company
car.

SJEDD board members, including Chairman Len Desiderio, said they
were unaware of Dahl's plan to recoup district expenses through
subleases with park tenants. Board members also say they were
unaware of the district's financial situation.

The South Jersey Economic Development District, the agency that
coordinated building the $7 million infrastructure at the planned
NextGen Aviation Research and Technology Park in Egg Harbor
Township, is unable to pay an estimated $495,000 to contractors
that did the work.

And SJEDD failed to complete timely audits - as required under
U.S. Economic Development Administration guidelines - for two years
in a row while undertaking its largest project ever. An audit
covering March 2009 through March 2010 was finalized just last
week.

As a result, Atlantic County withdrew from the district because
the district was unable to provide accurate accounting of the
project's debt.

Officials at SJEDD now say the the district may not survive if
they are unable to recoup $858,000 spent on the NextGen park so
far. Project debt totals more than $1.3 million.

SJEDD, the state's only economic development district, was
founded in 1979 under the U.S. Economic Development Administration
for the purpose of regional economic planning. The district
includes Cape May, Cumberland and Salem counties. Atlantic County
withdrew last month after 32 years, citing various concerns about
the district's operations, including the financial accounting. The
SJEDD is funded by $12,000 membership fees paid by the counties,
funding provided by the federal EDA, plus other grants and revenue
received through administered projects.

Gordon Dahl, executive director of the SJEDD, said the district
has been negotiating with the NextGen park's board, which wants
SJEDD to turn over the project's land lease that it holds with the
Federal Aviation Administration. Dahl and the district's board
members say they have no intention of giving up the rights to the
lease unless the district is paid the $858,000. The district's
board passed a resolution last week agreeing not to accept anything
less than that amount for turning over the lease.

"There was no question that the district would recover its money
from the land leases so the money could go to the next project, and
the next project. (The park's board) came in and said, ‘We're
taking over the project. You won't have the land leases, and we're
not paying you the capital costs you put into the project that you
expected to get back,'" Dahl said.

However, current and former SJEDD board members who were asked
about the sublease model, including board Chairman Leonard
Desiderio, said they were unaware of that plan - pointing to some
degree of miscommunication between them and Dahl. Board members
also said that while they approved project expenditures, they were
unaware, until recently, that the district was unable to pay it's
contractors.

"I knew what was being spent in a general sense, but I was under
the impression that the district had the money," said Cape May
County Administrator Steve O'Connor, who was a board member until
December 2011.

Control of the land

The NextGen park was first announced in October 2005 as a
seven-building center that would bring 2,000 high-paying jobs to
the area. Building construction, however, has yet to begin.
Opportunities for financing the construction were missed under
SJEDD's leadership as recently as December 2010, when the district
lost a $15 million stimulus bond after it and the park's board
failed to secure tenants for the first building.

Bids for construction of the first building have twice expired
and were later extended as SJEDD and the park's board were unable
to secure a developer needed to finance construction. In January,
the low bidder, Hunter Roberts Construction Group, with offices in
Philadelphia and Newark, agreed to extend its $9.5 million bid to
June 30, 2012, and New Vistas Corp., a Northfield-based real estate
and development firm, was announced as a "conditional designated
developer" for the project.

However, the announcement is unusual as the park's board, which
selected New Vistas, does not have control of the park's land.
SJEDD retains the final say over the land through a lease agreement
with the FAA. The district will default on the lease if it fails to
begin construction of the first building by Dec. 21, 2014.

In January, Dahl and his attorney turned down an offer from the
New Jersey Economic Development Administration for a $495,000
bridge loan to pay the contractors, one of whom has not been paid
since March 2011.

The bridge loan also would have allowed the district to close
out a $2.5 million federal EDA grant. As a condition of accepting
the loan, SJEDD would have been required to transfer the lease to
the park's board, according to an email written by Dave Nuse,
managing director of real estate for the state EDA, that was
obtained by The Press of Atlantic City.

"Giving us a $500,000 loan, which we have to pay back, doesn't
help the district," Desiderio said. "In hindsight, if we had known
what this (NextGen) project was going to be, I think you would have
(had) three counties voting not to get involved with it. If we all
knew the magnitude, we would have looked for someone else to carry
the load. The district can't move forward without its
$858,000."

Howard Kyle, chief of staff to Atlantic County Executive Dennis
Levinson, said the county has become very involved in attempts to
transfer the NextGen lease to the park's board and that it has a
vested interest in advancing the project. Kyle said the county
believes the district incurred expenses at its own risk, according
to a June 2010 memorandum of understanding between SJEDD and the
park's board. Atlantic County has contributed $2.5 million taxpayer
dollars to the park's $7 million infrastructure installation.

The agreement examined by The Press of Atlantic City states that
the parties are responsible for funding their own activities and
agree to assume their own risks and liabilities.

"SJEDD rejected the (loan offer from state EDA), insisting on an
$858,000 bailout to cover what they called their out-of-pocket
expenses. In other words, they were saying if they don't get a
bailout, then nobody gets paid and they don't care if the project
goes down with them," Kyle said.

"Atlantic County's position is that SJEDD's financial problems
are largely the result of unilateral decisions made by the
executive director without the full consent of its board. ... If
audits were done as required, this would have shown up, and the
board might have been able to address this early on."

In October 2011, the county examined SJEDD's finances on the
NextGen project and found the $858,000 in unfunded liabilities, or
costs incurred during the course of the project that are not
subject to reimbursement under other financing agreements. The
district had previously been unable to provide an accurate
representation of its expenses, county and park officials said.

The $858,000 includes more than $107,000 of interest on a bank
loan, nearly $550,000 for architectural firm Environetics Design
Inc., and $82,000 for Joe Sheairs, who acted as an SJEDD consultant
on the project prior to becoming the park's interim executive
director in 2009.

In April 2011, SJEDD sought as much as $1.74 million to turn
over control of the project. More than $1 million of the total was
accounted for as fees for administering contracts, and obtaining
and implementing grants. The district is now focused on the
$858,000, Dahl said.

Atlantic County Freeholder Frank Formica was on SJEDD's board
for about a year. He says he had serious concerns about the
organization. He and Kyle spoke of a meeting that took place Oct.
18, 2010, in which Dahl stated he had the money to pay his
contractors and would do so by Dec. 1. When that deadline was not
met, Formica said Dahl later admitted at a Dec. 12 meeting that he
did not have the money to do so.

Dahl disputes that interpretation, and says he never
misrepresented the debts of the project or the district's financial
position. Instead, he says, he's always provided the best numbers
he's had available on a project with mounting expenses.

"Gordon has promised in front of his board members that he would
pay his contractors, and no one has gotten paid. We cannot in good
faith be part of an organization that has been less than
responsible with the public trust and public funds," Formica said.
"It's undeniable that there is no money to pay his encumbered
expenses."

Unpaid contractors

According to the district's unaudited calculations, about
$495,000 is needed to close out a $2.5 million U.S. Economic
Development Agency grant. The district must first pay that sum to
its contractors and will be reimbursed later by the EDA with the
grant money.

SJEDD took out a $350,000 bank loan to help front some of its
expenses, but that line of credit has been exhausted. As of October
2011 - in the most recent figures prepared by Atlantic County's
auditor - $107,000 of interest had accumulated on that loan.

Atlantic County Improvement Authority Executive Director John
Lamey confirmed that his authority, which acted as a project
manager for the infrastructure installation, is owed $64,500. The
authority has not received a payment from SJEDD since March 2011
for a bill issued in December 2010. On Feb. 2, the authority issued
a letter of default to SJEDD demanding that the district identify
the funding source dedicated to pay ACIA when the contract was
executed. Payment must be made by Feb. 24 or ACIA will take legal
action, the letter states.

ACIA's contract with SJEDD expired Aug. 31. Despite going five
months without payment, the authority continued to complete work at
the site through October and still makes occasional trips to the
site, Lamey said. The agency has not billed for any work since
August.

"We've maintained an as-needed presence and done so in
recognition of the importance of the project to our region," Lamey
said.

Birdsall Services Group, a Sea Girt, Monmouth County-based
engineering firm, is owed nearly $140,000. Other contractors owed
money reimbursable to the district under the EDA grant include
Berlin, Camden County-based Mount Construction; Howell, Monmouth
County-based Caruso Excavating, and Egg Harbor City-based Accent
Fence. October calculations show the companies were owed $134,000,
$56,000 and $85,000 respectively, according to the county's
financial report on the project obtained by The Press.

Dahl told The Press that any unpaid invoices were due to
insufficient work. In particular, he said, he was unhappy with
uneven fencing installation, which caused him to withhold payment
to the ACIA. The ACIA, however, said it has not heard any
complaints about workmanship since the infrastructure installation
was finished in the fall.

"I've spent most of the last year conducting my own inspections
on that park because I needed to have the confidence things were
getting done right," Dahl said. "That was on my time, not the
district's time. I was out there on weekends."

SJEDD also entered into a $172,000 agreement with Atlantic
County in December 2010 for road improvements at the intersection
of Delilah Road and the NextGen park's access road. The district
agreed to use the county's contractor for the improvements and to
reimburse the county for its expense, according to the resolution
authorizing the agreement and examined by The Press.

When a Sept. 12, 2011, $76,000 invoice was still unpaid by Jan.
3, the county issued a letter of default to the district,
threatening to "proceed with all remedies and measures that may be
available to secure funding and sanction the SJEDD for breach of
contractual obligations."

Dahl issued payment to the district Jan. 18, citing concerns
about the quality of the asphalt. County officials said those
concerns had never before been addressed, but would be explored.
The county has since issued another invoice to SJEDD, requesting a
nearly $83,000 payment associated with the same agreement.

How the district works

When SJEDD was first formed in 1979, it was heralded as an ideal
way to secure additional funding for the region: A regulation made
development districts eligible for an added 10 percent of funding
when they applied for federal EDA grants on behalf of member
counties.

That regulation, however, was removed from legislation in 2004,
according to the federal EDA. There are no other financial
incentives to being part of a district. However, without being a
member, a county or municipality cannot apply for federal EDA
funding unless it has developed a Comprehensive Economic
Development Strategy.

The federal EDA's Philadelphia Regional Office oversees SJEDD.
The district is a nonprofit corporation but under its
classification is not required to file Form 990s.

Its current development strategy is outlined in a nearly 90-page
document available to the public on the district's website that
includes employment statistics and development strategies in
various sectors such as tourism, aviation, health care, and
renewable energy.

SJEDD helped secure and administer a $1.5 million federal grant
for the New Jersey Motorsports Park in Millville, a $2 million
federal grant for the Rutgers Food Innovation Center in Bridgeton,
and a $1.2 million federal grant for Atlantic Cape Community
College's Allied Health Technical Institute.

Dahl has been the district's executive director since 1987. He
earns $120,000 annually. The district's staff is composed of Dahl,
senior planning officer Diana Schiavo and administrative assistant
Deborah Dalton. Their salaries are funded through the district's
revenues, which come from membership fees paid by counties, federal
EDA funding and grants.

Development districts are required to submit audits to the
federal EDA only if specifically requested or if the district has
spent at least $500,000 of federal funds within a given year.
According to those federal guidelines, the district was required to
submit an audit, also known as a Circular A-133 under federal
regulations, for the past two years; SJEDD has not done so. SJEDD
drew down more than $1 million of a federal grant for the park
between December 2010 and August 2011.

The federal EDA, recently discovering the oversight, has
requested the A-133, but is not penalizing the district.

"Not having an audit done in two years falls on the
responsibility of the entire board. Quite honestly, I don't know
how that wasn't caught, and it's not excusable," said Cape May
County Administrator Steve O'Connor, who was a board member for
eight years. O'Connor stepped down in December 2010.

Ocean City-based Ford-Scott and Associates auditor John Sabella
said SJEDD did not present materials for the 2009-10 audit until
February 2011, 11 months after the end of the district's fiscal
year. At that point, Sabella suggested completing a two-year audit,
which was later approved by board resolution.

"I would assume that everything would be running the way it ran
every other year," Desiderio said when asked why the lapse was
allowed to occur. "Being on this board is not a day-to-day,
right-on-top-of-it micromanagement of this little district. Up
until this NextGen project, everything was smooth, and there was
never anything to question, or look at, or wonder, or think
about."

Every three years, districts also undergo federal EDA
performance evaluations. SJEDD's last occurred in 2010. At that
time, no problems were found, according to the EDA.

Dahl has since promised that both years' audits would be
complete by Jan. 31. However, that deadline was not met. A copy of
the 2009-10 audit approved by SJEDD's board last week has not yet
been made available to The Press. A draft of the 2010-11 audit has
not yet been completed, and next month the 2011-12 audit should
commence. The district's fiscal year ends in March.

Meanwhile, Ford-Scott and Associates found "significant
deficiencies" in the district's accounting practices, even in its
2008-09 audit. In an April 30, 2010, letter to the district's
management and board, it said certain preferable internal controls
did not exist and may not be feasible due to the (small) size of
the district's staff.

"This situation dictates that the Board of Directors remains
involved in the financial affairs of the district to provide
oversight and independent review functions," the letter read.

The audit also questioned why Dahl was using his SJEDD-issued
vehicle to commute to and from work.

"Commuting from the director's home to the district office is
not considered business use. The value of this business use should
be included in the director's wages or be reimbursed to the
district by the director," the letter read.

Concerns about Dahl's use of the company car had been brought to
the board's attention previously. Former SJEDD attorney and project
manager Judith Arnold, who left the district in November 2009,
questioned Dahl's use of the company car among other practices
involving Dahl's decision-making in a letter to the board.

In June 2009, SJEDD's board appointed Mount Laurel-based
attorney Beth Lincow Cole to investigate the allegations. She
returned a "confidential investigation summary report" to district
leaders a month later finding that no wrongdoing took place,
according to the report examined by The Press.

Five months later, Arnold wrote to the U.S. Attorney's Office
and state attorney general questioning the same practices. In the
letter obtained by The Press, she also questioned the district's
accounting practices. Representatives for the U.S. Attorney's
Office and the state attorney general said they could not confirm
nor deny investigations.

Moving forward

Aside from the financing struggles, the SJEDD's board members
question the strength of the district without Atlantic County.

"I question whether the district is sustainable without Atlantic
County. If it can move on, its mission will be severely weakened.
It really needs the partnership of all four counties to remain a
strong, viable organization," O'Connor said.

Federal EDA officials said any projects presented to the EDA
will still be evaluated on their own merit and the remaining
counties will not necessarily be hurt, though population estimates
for the district and per capita income will fluctuate.

Cumberland County Freeholder William Whelan, who has been a
board member for about a year, said the remaining three counties
are hoping the financial difficulties can be resolved so that
Atlantic County can again become a part of the district.

Asked about the financial position of the district, Whelan said
he couldn't speak to that until both of the past-due audits have
been completed.

"I'd rather have an answer based in fact than in a gut feeling
in my stomach. At this point, I need more information." Whelan
said. "As a board member, you have an understanding to a certain
extent. We're there to make policy decisions, not manage budgets.
My gut tells me the district may have overstepped its means."